The overtime formula
Under the federal Fair Labor Standards Act, nonexempt employees earn 1.5 times their regular rate for hours over 40 in a workweek. Written as a formula:
Gross pay = (40 x hourly rate) + (overtime hours x hourly rate x 1.5)
Overtime hours are simply total weekly hours minus 40. If you worked 45 hours, your overtime hours are 5. The workweek is a fixed 7-day period set by the employer. It can start on any day, but it cannot be shifted around to dodge overtime, and two weeks cannot be averaged together.
This guide covers gross pay before taxes and deductions. Net pay is a different calculation entirely, and comparing gross figures to your take-home deposit is the most common reason people think their overtime is wrong when it is not.
Example 1: 45 hours at $20 an hour
The textbook case. Regular pay: 40 x $20 = $800. Overtime hours: 45 minus 40 = 5. Overtime rate: $20 x 1.5 = $30. Overtime pay: 5 x $30 = $150. Gross pay: $800 + $150 = $950.
Note that the overtime portion is the full $30 an hour, not a $10 premium added on top of some other line. Pay stubs sometimes show regular pay for all 45 hours plus a separate "overtime premium" line of 5 x $10 = $50. That stub would read $900 regular + $50 premium = $950, the same total, just displayed differently.
Example 2: 50 hours at $22.50 an hour
A fuller week at an odd rate, the kind that trips people up. Regular pay: 40 x $22.50 = $900. Overtime hours: 10. Overtime rate: $22.50 x 1.5 = $33.75. Overtime pay: 10 x $33.75 = $337.50. Gross pay: $900 + $337.50 = $1,237.50.
Check it the other way: your total earnings equal your regular rate times 40, plus your regular rate times 1.5 for each of the 10 overtime hours. No rounding until the very end. Rounding the $33.75 mid-calculation is how phantom pennies appear on pay stubs.
Example 3: 40.5 hours at $16.50 an hour
Small amounts of overtime still count. Regular pay: 40 x $16.50 = $660. Overtime hours: 0.5. Overtime rate: $16.50 x 1.5 = $24.75. Overtime pay: 0.5 x $24.75 = $12.38 (rounded to the cent). Gross pay: $660 + $12.38 = $672.38.
This is the example that catches time theft. A half hour of overtime every week is $12.38 a week, or about $644 a year, silently kept by an employer who "does not count" the extra 30 minutes. The law counts it.
Example 4: California double time on a 13 hour day
California adds daily rules on top of the federal weekly rule: 1.5x after 8 hours in a day, and 2x after 12 hours in a day. A 13 hour day at $20 an hour breaks down as 8 regular hours (8 x $20 = $160), 4 overtime hours (4 x $30 = $120), and 1 double time hour (1 x $40 = $40). Total: $320 for the day.
California also pays 1.5x for the first 8 hours worked on the 7th consecutive day in a workweek, and 2x for hours past 8 that day. Alaska has daily overtime after 8 hours too. Most other states follow the federal 40-hour rule only. Run your numbers through the time card calculator with your own thresholds to match your state's rules.
What counts as overtime hours
Hours over 40 in one fixed workweek. That is it. Paid holidays, sick days, and vacation hours do not create overtime by themselves: if you worked 35 hours and took 8 hours of holiday pay, your 43 "hours" include only 35 hours actually worked, so no overtime is owed under federal law.
Overtime also applies to nonexempt employees only. Exempt status depends on salary basis, salary level, and job duties, not on a title like "manager." Misclassification, where an hourly-style worker is labeled exempt to avoid overtime, is one of the most common wage violations the Department of Labor finds.
The regular rate trap
The "regular rate" is not always the hourly rate on your offer letter. Nondiscretionary bonuses, shift differentials, and some commissions get folded into the regular rate, which raises the overtime rate too.
Example: a $20 an hour worker earns a $100 weekly production bonus and works 45 hours. The regular rate becomes (40 x $20 + $100) / 40 = $22.50 an hour, so the overtime rate is $33.75, not $30. That is a $13.75 difference on the week. If your overtime pay looks slightly lower than the formula predicts, check whether bonuses are being left out of the rate.
Checking your paycheck
Work backwards from the stub. Total gross pay minus your best estimate of regular pay leaves the overtime portion; divide that by your overtime hours to get the implied overtime rate. If it is not 1.5 times your regular rate (adjusted for bonuses), something is off.
Common findings: the wrong workweek boundary splitting a 45 hour week into two pay periods, "comp time" offered instead of overtime pay (illegal in the private sector), and automatic lunch deductions on days no lunch was taken. Each of these shows up as a number that the formula above contradicts.